The Good Problem With Housing Near Transit: It’s Almost Too Popular

Local officials are catching on to the power of transit-oriented development to transform quality of life while decreasing congestion, as my colleague Ryan Avent has explored. But now that the federal government is starting to explore how to expand transit-accessible housing, an intriguing problem is arising: it’s almost too popular.

After a year-long investigation in 11 cities, auditors at the independent Government Accountability Office (GAO) reported last week that the rising value of housing near transit risks pricing lower-income residents out of the market.

In other words, as transit-oriented development attracts more residents to a given area, property owners are likely to increase prices — making affordable housing more scarce and rendering government vouchers insufficient.

The GAO’s report cites findings from Reconnecting America, AARP, and the National Housing Trust, which warned yesterday that Section 8 federal housing contracts near transit are set to expire in large numbers over the next three years. If landlords decide not to re-up for affordable housing in order to charge higher rents, low-income residents could be stuck without transit access, according to the Reconnecting report.

How can affordable housing near transit be preserved for workers who often can’t afford and have no use for a vehicle? One answer, the GAO found, is for the federal government to create a reliable mechanism for helping localities develop land near transit stations — not least because the state-level situation is spotty:

Few local and state programs are targeted to assist local housing and transit providers develop affordable housing in transit-oriented developments; the few targeted programs that do exist mainly provide financial incentives to developers if they include affordable housing in new residential developments in transit-oriented developments.

The first elements of a coherent federal policy that links transportation and housing are already in place, with the Department of Housing and Urban Development (HUD), the Environmental Protection Agency (EPA), and the U.S. DOT partnering on a "sustainable communities" effort and the Senate pitching in with $4 billion in proposed grants.

Still, the lack of concrete data on affordable housing near transit is a major stumbling block to crafting an effective federal policy. The GAO did conclude that transit-oriented development increases the value
of nearby housing and land, though the amount of that increase can vary
depending on the neighborhood’s proximity to
retail businesses, and schools as well as the local crime rate.

But HUD told the independent auditors that recipients of federal housing aid are allowed to "self-report" their locations to the government, and the GAO found notable inconsistencies in the location data that does exist. Also, local transit officials told the GAO that the U.S. DOT’s oft-maligned New Starts program often failed to fully account for the economic development that arises in the wake of new transit projects.

The auditors advised HUD and DOT to address "weaknesses" in information-gathering or "risk losing momentum" just as their transit-oriented development push gets off the ground. Given the troubling conclusion of the Reconnecting report — that as many as 160,000 renters could lose transit-accessible housing over the next five years as land values rise — there may be little time to waste.

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This also seems to call for, um, more transit. If adding transit raises land values so much, it’s probably because there’s a short supply of transit and a high demand. Increase the supply and the price increase for being near transit should drop, as many many more places become nearby to transit.

I’ve seen a lot of stories about housing price premiums around rail transit. I think in the aggregate, it’s a fair assessment. But there are certainly some places where the premium is very high, and others where it is not. If you look at a single city, say, Chicago, you could say that property around the red line north of the loop probably sells at a huge premium; but property around the orangle line or the green line south of the loop, not so much. Or look at entire systems. In Cleveland, almost none of the property around the red line sells at any premium.

I’d like to see some research on these apparent failures rather than just the successes. What went wrong? What contributed to the lack of demand in those areas?

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